16 August 2013

Reuters: The Dutch, Europe's apostles of austerity, feel the economic pain

The Netherlands, outspoken advocate of fiscal pain as a cure for eurozone ills, found itself in unwelcome company this week as the bloc's economic recovery left it among a handful of laggards still in recession.

For the austerity-touting core eurozone state critical of budget laxity elsewhere, things are not likely to change soon. Growth is forecast to be worse than expected next year and the Dutch budget deficit is swelling.

The deficit to GDP projection was just increased to 3.9 per cent from 3.7 per cent for next year, compared with the eurozone target of 3 per cent. And while moderate growth in Germany and France lifted the region as a whole out of recession last quarter, Dutch gross domestic product shrank both quarter-on-quarter and year-on-year, by 0.2 and 1.8 per cent respectively.

In July, 25 companies were declared bankrupt every day, the highest reading since 1981. Unemployment hit another record high in the month, reaching 8.7 per cent of the workforce. The latter is minimal compared with places like Spain, but the Netherlands is nonetheless being hit by deeply pessimistic consumers, the highest unemployment rate in decades and plummeting home values. "You can no longer speak of a European problem, but failing Dutch policy", said Arnold Merkies, opposition member of parliament for the Socialist Party. "While unemployment falls in the countries around us, it continues to rise in our country."

Along with their German neighbours, the Dutch have been among those taking the hardest line over aid for eurozone countries seeking bailouts to help economies crippled by the financial crisis. During election campaigning last year, Rutte said the Dutch would not give "a penny more" to Greece, though his government later supported another bailout tranche when Athens agreed to strict austerity measures and reforms. The country's European Central Bank member, Klaas Knot, is one of the bank's more hawkish members. And Dutchman Jeroen Dijsselbloem, who heads the Eurogroup of eurozone finance ministers, said in March that a rescue deal for Cyprus forcing losses on uninsured depositors would be a model for dealing with future eurozone banking crises.

Some economists see signs of a bottoming out, citing a slowing fall in home prices in recent months and the first positive purchasing managers index reading in half a year. Still, most experts don't expect growth to pick up in earnest until 2015 or 2016, with eight out of 10 Dutch nationals pessimistic about the future.

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